Data visualization can revolutionize your firm. Join us on May 19th for our Analytics Masterclass webinar to learn how. Register now.

Three young professionals look over the terms of a deal together.
Five portfolio management tips from venture capital veterans

Venture capital is often referred to as an apprenticeship business because so much important learning comes from day-to-day experiences. Yet, as an article published by the Business Development Bank of Canada (BDC) explains, you can shortcut the learning process by learning from experts: “Your learning curve can be shorter—and your results better—if you learn from pros who’ve already mastered key … ... read more

Startups Commercial Real Estate

Experts Believe that Office Space Could Become a Perk in a Remote Work World

By Anne Gherini

Experts have said that Covid-19 will permanently change the state of work.  They’re probably right, but it’s not yet clear exactly what the physical office will look like in a post-pandemic era. Here’s a look at what transformations to the physical office may be on the horizon and which predictions aren’t likely to pan out as expected. 

The future of open office spaces 

Open office layouts have been a hot topic since their inception. Intended to foster collaboration and communication (and also to save costs and fit more desks into a room), many experts believe—and have shown through research—that the opposite may be the case.

One study published in Harvard Business Review found that face-to-face interactions actually dropped by approximately 70% after one firm had transitioned to open offices. 

Why did this happen? The authors explain that, after transitioning to an open office, workers put up “fourth walls”— conceptual boundaries to prevent distractions by, for example, appearing to work intently or wearing headphones. These fourth walls can have an unintended negative effect on healthy collaboration.  

Pre-pandemic criticisms of open office spaces have been fueled more recently by concerns about the propensity of open office’s to spread Covid-19. A survey conducted by Propeller Insights among US adults—a Los Angeles-based market research firm—found that the top reason driving people’s fear of contracting Covid-19 is working in an open-office environment, with more than half (51%) of respondents citing this as a concern. What’s more, 53% of respondents said open offices will lead to an uptick of Covid-19 cases, while 41% said open offices “will be a hotbed of infection.” 

Dr. E Hanh Le, senior director of medical affairs at Healthline—a provider of healthcare information—is one among many medical professionals who has qualms about open office spaces. He’s said, “Open office spaces are among the worst for COVID-19, particularly if they are sealed office spaces without open ventilation and the air is just recirculated within the building.” 

Remote work experiment 

It would seem that the accelerated transition to distributed work might not only lead to less open office space, but also likely eliminate office space in general. The world was forced to join the remote work culture overnight, and many found that they were equally productive. 

According to Bloomberg, Co-President of JP Morgan, Dan Pinto, was cited as telling Citigroup that traders were able to handle as much as three times the normal trading volume in the first quarter while over 90% of their traders were remote. 

Stats like this make you question if you should be focusing your efforts on getting out of your office lease, yet there are several reasons why this might be misguided.

More—not less—office space 

Former Google CEO Eric Schmidt recently predicted that office space will be in greater demand after the pandemic subsides. Schmidt predicts that we will see a type of hub-and-spoke system, where businesses may decide to increase the number of satellite offices they build to help people minimize commuting via public transport. He explained, 

We're going to have to think about hub-and-spoke systems where local people don't travel so far because they don't want to be in public transit for so long. So we're going to have to really rethink how businesses operate. They need their employees back.

As businesses have attempted to cut costs in recent years, they’ve increased worker density in their offices. In Britain, the space per workstation has declined by approximately a quarter over the past decade. However, if businesses follow social-distancing mandates, this may reduce the number of workers that offices can host to 30-35% of the pre-pandemic total. If businesses don’t make major adjustments to their distributed work policies, many will need to purchase additional space. 

An unparalleled social experience 

There are other reasons why we shouldn’t be so quick to expect the demise of the physical office—even among tech workers. On a recent episode of Pivot, NYU Professor Scott Galloway, predicted that we’re going to see second-order effects of Covid-19 in terms of how younger versus older workers view physical office spaces. Galloway explained, 

The Google cafeteria just became incredibly valuable and a point of differentiation for a young person. If you're 25, you don't want to work from home. You want to meet your husband or wife at the Google cafeteria or at a coffee bar at Pinterest. Socialization and the ability to go into work is going to become a feature, not a bug.

Thinking beyond productivity

Working in a physical office is about much more than productivity. It’s also about collaboration and community. Very few companies have yet to succeed in building a virtual work environment that rivals the collaboration and community established in physical offices. Reflecting on Microsoft’s transition to distributed work, CEO Satya Nadella, has said that “raw productivity stats for many of Microsoft’s workers have gone up, but that isn’t something to “overcelebrate.”

He added,

What I miss is when you walk into a physical meeting, you are talking to the person that is next to you, you’re able to connect with them for the two minutes before and after. That’s tough to replicate virtually, as are other soft skills crucial to managing and mentoring.

Nadella goes on to say, "switching from offices before the pandemic to an all-remote setup would be replacing one dogma with another dogma. What does burnout look like? What does mental health look like? What does that connectivity and the community building look like? One of the things I feel is, hey, maybe we are burning some of the social capital we built up in this phase where we are all working remote. What’s the measure for that?"

Matt Chatham, Tenant Representation Lead for San Francisco at Cushman & Wakefield, also believes that the unparalleled collaborative experience afforded by co-located environments will drive people back to physical offices. He explained, 

Everyone has to acknowledge we’ve spent the last 10 years talking about culture, collaboration, and the energy of the workplace - that’s why these dense environments were created, because it helped with onboarding, mentoring, career advancement and allowing people to feel like they're a part of a greater cause. That gets lost within video conferencing calls, and we think that will be the main driver to get people back to the office.

As Chatham summarizes, "We’ve learned people can be productive from their living room but the driver to bring people back into the office will be about connection and culture." 

All that glitters is not gold

Reacting to Twitter’s decision to allow most of its employees to work from home indefinitely, Casey NewtonSilicon Valley Editor at The Verge— recently tweeted about “the glorious day in the future when [Twitter] will be forced to acknowledge it has hundreds of employees on the payroll who haven’t showed up for years.” 

Newton also referenced a recent article by The Wall Street Journal contributors, Chip Cutter and Suzanne Vranica who scrutinized plans to redesign and reconfigure offices. He reflected on whether the following excerpt more closely resembles on office or a torture chamber: 

Elevators may only take one person at a time. Desks, once tightly packed in open floor plans, will be spread apart, with some covered by plastic shields and chairs atop disposable pads to catch germs. The beer taps, snack containers, coffee bars and elaborate gyms and showers that once set high-dollar, white-collar environments apart will likely remain closed to prevent the spread of coronavirus.

Looking forward

There’s no denying that the physical office space will change in the recovery and aftermath of the pandemic. But it’s highly unlikely that workplaces of the future will resemble torture chambers or that all workers—even at a tech darling like Twitter—will opt to work remotely 100% of the time. In all likelihood, if constructed in compliance with social distancing guidelines and also constructed thoughtfully to still allow workers to work flexibly and reduce commute times—physical office spaces may be more valuable and, in aggregate, encompass greater square footage than ever before.

Chatham envisions a world where dedicated in-office seating becomes a valuable perk. He explained to us,

Long term… say less than 18 months from now, that emphasis on culture, mentorship, on boarding will be a key business objective. Dedicated seating will be a prominent company feature. Think about a key hire getting offers back from company A and company B. Company A says they have a dedicated seat for you with WFH flexibility, whereas company B says your remote only or you can come in and sit in the hot desk area. If all things are the same, you take the job with Company A - dedicated seating becomes a new company perk.

Office space is not disappearing it is just being reinvented for the post-pandemic world. Trends like cramming teammates in an open space layout will be replaced with next age cubicles and breakout rooms with circulating purified air.  Even if a percentage of employees become remote, the need for safe spaces for employees to gather periodically is a must. Creative reconfigurations of traditional offices will enable employees more flexibility while also providing a safe place to meet, connect and work without home distractions. 

Click to learn more about how we are helping CRE professionals find their next opportunity. 

Startups Commercial Real Estate